Is The Gaming Industry Dying?

Let’s put it all out on the table. It has been a terrible year or two for the gaming industry. As both a passionate, lifelong gamer and an industry worker, I’ve witnessed first-hand what the recent waves of disruption and devastation have done to the space I’ve been neck-deep in for so many years. In the last eighteen months, we’ve seen age-old studios close down, more than 16,000 people laid off, and countless titles cancelled and cast into a vast abyss. It’s not so far-fetched to wonder if the gaming industry is dying.

But is that the case? If we take a cursory glance at the data available, we can see that there’s more money than ever before in the gaming industry. There are now more than two billion gamers in the world, and the number of ways in which content can be monetised is quite simply staggering. There are games out there selling tens of millions of copies in a matter of weeks, and thanks to the diversity of technology, there are more ways to play than we ever thought possible.

It’s no big secret that some severe issues are lurking under the surface of that success, though. There’s a real people problem in the business that we know and love – but is the gaming industry dying?

TALKING ABOUT TRENDS

It has been estimated that in 2023, a whopping 11,250 gaming industry workers were laid off. In January 2024, more than 6,000 people were made redundant across the industry. That trend didn’t slow down, either. In February, the likes of Electronic Arts and Sony laid off up to 1,500 employees, slashing workforces, cutting out projects, and shutting down studios around the world. In April, Take Two have laid off another 5% of their workforce.

It can be considered a global adjustment as developers, publishers, and associated studios come to terms with a range of issues:

• Rising development costs and declining investments
• Growth of AI technology
• Changes in consumer habits
• Post-COVID revenue corrections

In an industry worth $180 billion, more people are consuming content and products than ever before – but we’re also seeing more staff cuts. Consider the Embracer Group, a company that underwent an aggressive expansion, snapping up studios left and right. It suffered when a deal worth $2 billion fell through, leaving the Group to divest many of its assets, closing down companies and laying off – as of February 2024 – 1,400 employees.

IS NEW TECHNOLOGY FUELLING CUTBACKS?

AAI technology isn't currently leading to the replacement of thousands of employees, but it is assisting publishers and developers in realizing that numerous operations can be managed through artificial intelligence. Recently, the CEO of Electronic Arts highlighted that AI could affect '60% of all development processes.' As this technology continues to advance, we may witness a surge in layoffs as the trend of AI-driven replacements takes hold.

Although, there is a noticeable backlash against the use of AI. Consumers don’t want to play games procedurally generated. There’s also increasing concern about the overhyped nature of AI right now, that despite all that’s promised large language models haven’t really provably done much outside of novelty. Even recent AI-focused projects from Amazon have been revealed to not really be using AI, but simply outsourcing.

In an emerging technology like this it’s tricky to predict where it will go. Developers seem to be showing they’re willing to push AI to tighten the production budget, even if consumers aren’t exactly on board.

ACQUISITIONS AND CONCENTRATION – WILL MONOPOLIES LEAD TO GAMING DYING?

We’ve also seen a fair few acquisitions that have shaken up the market, most notably Microsoft’s acquisition of Activision Blizzard. Redundancies will inevitably be made during an acquisition to eliminate duplicated functions, but Microsoft wiped out 1,900 AB and Xbox employees in January 2024, marking a monumental moment in the miserable trend.

The last few years have seen a trend towards more and more developers being concentrated together. It’s arguable that some of these are beginning to resemble a monopoly. However, the breakout hits from newer previously unknown devs like Palworld have proven there will always be a market for smaller games.

DOES ALL THIS SPELL ‘DEATH TO GAMING’ OR ‘GAMING IS DEAD’?

Change is inevitable – that much is guaranteed. We’re seeing some positive points emerge amid this global, industry-wide adjustment. Gamers are more engaged than ever before, and some unexpectedly successful titles have led to massive periods of growth for some developers – including independent creators. For instance, Palworld, which was released in January to an overwhelmingly positive reception, racked up 10 million sales in the space of a week.

How about the anticipation for what comes next – or what’s coming back?

• GTA 6’s first trailer broke viewership records when it debuted in December
• More remasters than ever before are hitting the market and selling exceptionally well
• The biggest showcases and ceremonies in gaming are outpacing the likes of the Academy Awards
• Tens of millions of ‘wishlists’ and pre-orders are still being recorded
• Fortnite’s ‘OG’ map returned and 44 million players were online at the same time
• Coming out of COVID-19, hundreds of thousands of people are returning to gaming expos and conventions
• Esports viewership and engagement are blowing up in some places

The sentiment will improve immeasurably once the course is corrected for the wider industry and the dust has settled. There’s a paradigm shift taking place, that much is certain. Does it mean the gaming industry is dying though?

CHANGE ISN’T ALWAYS BAD

Business models are shifting, subscription services are eating up a big piece of the pie, and cloud gaming is emerging more with each passing day. There’s a huge move away from physical media occurring, and live-service games are the order of the day.

It’s all changing, but there’s certainly an argument that it’s changing for the better. The games industry isn’t alone when it comes to inflation. Compared to similar industries though – movies, television, and music, for example – gaming is doing much better. Financial growth is predicted across all areas of the industry, the global audience is expanding all the time, and the sheer depth and breadth of games available to play is mind-blowing.

In 2023, Steam reached new heights with a remarkable 14,500 games launched on the platform and a peak in concurrent player numbers.

SO, WHAT’S NEXT FOR THE GAMING INDUSTRY?

What’s next is a continuation fuelled by constant adjustments and technological evolutions. This isn’t an industry that will blink out of existence overnight. As financial and resource-based struggles persist, companies must find a way to roll with the punches and weather the storm. It’s heartbreaking for thousands of workers, but the way that’s being done now is through restructuring and reorganisation.

Change doesn’t mean the gaming industry is dying. Innovations will emerge. Thousands of games will continue to hit the market. Through mobile devices, VR headsets, desktop PCs, home consoles, and cloud-based services, billions of gamers are still out there exploring vast, fantastical worlds, facing down gargantuan bosses and revelling with their friends in the best multiplayer games on the market.

Ultimately, it’s not all bad. Change might be inevitable, but another adage comes into play quite nicely here: ‘This too shall pass’.